Proceedings of the 7th international joint conference on Autonomous agents and multiagent systems - Volume 1
Risk-sensitive planning with one-switch utility functions: value iteration
AAAI'05 Proceedings of the 20th national conference on Artificial intelligence - Volume 2
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This paper considers decision-making in the presence of two additive risk sources, with no restrictions on the relation between the two risks. A utility function is said to exhibit broad DARA if and only if a rise in wealth always decreases the magnitude of the risk premium for one of the risks vis-a-vis the other. A condition on utility functions giving this property is derived: utility must be of the linear plus exponential form. It is shown that certain problems involving portfolios and risk-averse firms give unambiguous comparative statics if and only if utility exhibits broad DARA.